More frequent, broadly disseminated information, the use of new communications tools, and the restructuring of sell-side firms must be implemented in addition to new regulations to restore confidence in corporate America, according to a PR Newswire survey of investment industry professionals.
For the survey, “Communicating with Investors and the Media,” PR Newswire polled more than 600 respondents from corporate America including 224 buy-side investors, 136 sell-side research analysts, 173 corporate investor relations professionals and 72 reporters at national business media. The survey reviewed the communication practices of public companies and the communication needs of institutional investors, research analysts, and the media. The objective of the poll was to identify current communication practices of corporate America and to determine what companies are doing to improve communications with investors and the media in an effort to increase transparency.
"Our clients want to know how the financial community views corporate America," said Michelle Savage, vice president, IR Services, PR Newswire. "This survey provides important information that can help public companies review their disclosure and investor communications practices. The information we gathered will also help us to offer our clients the most effective products and services to communicate with the financial community."
More than half of those responding report a “medium” level of trust in corporate America.
- 62 percent of the buy-side,
- 55 percent of the sell side,
- 46 percent of the media,and
- 60 percent of the corporate IR professionals.
A majority of the respondents said that their level of trust in corporate America has declined in the past year.
- 58 percent of the buy-side;
- 43 percent of the sell-side;
- 67 percent of the media and
- 50 percent of the corporate IR professionals.
When asked what elements would help to restore investor trust, more than two-thirds of all respondents mentioned elements of the Sarbanes-Oxley Act of 2002 as important or very important. The elements mentioned were:
- Requirements for an independent board (84 percent of the buy-side, 79 percent of the sell-side, 92 percent of the media and 87 percent of corporate IR);
- Requirements for an independent audit committee (88 percent of the buy-side, 86 percent of the sell-side, 87.5 percent of the media and 94 percent of corporate IR professionals);
New regulations for auditing firms (77 percent of the buy-side, 73 percent of the sell-side, 86 percent of the media and 73 percent of corporate IR). In addition, 70 percent of buy-side respondents stated that "more frequent, open and broadly disseminated information," is important or very important to restoring trust, while 73 percent of corporate IR professionals said that the restructuring of sell-side firms is important or very important.
About three-quarters of buy- and sell-side respondents (73 percent of the buy-side and 79 percent of the sell-side) stated that including more comprehensive financial information in earnings releases is important. Thirty- five percent of the corporate IR professionals who responded said that in the last quarter they had included more financials, heeding the call for greater transparency.
Furthermore, the survey found that approximately eight in 10 institutional investors (79 percent of buy-side and 80 percent of sell-side) believe that including more comprehensive information, specifically on the business outlook is important; more than one-quarter (26 percent) of the corporate IR professionals who responded said that they increased information on the business outlook in their releases compared with the previous quarter.
More than half of all the respondents (63 percent of the buy-side, 59 percent of the sell-side and 75 percent of the media) stated that highlighting key financials at the top of an earnings release is either important or very important. During the most recent quarter, 16 percent of the corporate IR professionals surveyed said they changed their earnings release to include these highlights.
Companies looking for new ways to communicate with investors should consider new technologies such as audio and video Webcasts, according to the survey. Audio Webcasts are an important source of company information for over two- thirds of institutions (69 percent of the buy-side and 67 percent of the sell- side). This compares to almost 70 percent of corporate IR respondents who said that they are currently using audio Webcasts to provide information on their company.
Even more significant, more than half of the buy- and sell-side respondents (61 percent of the buy-side and 52 percent of the sell-side) said they are interested in using video Webcasts to obtain information on companies, but only 7.5 percent of responding corporate IR professionals said that they are currently providing Webcasts in video format.
Two years after the Enron accounting scandal broke, confidence in corporate America is still in decline among the buy-side investors, sell-side analysts, the media, and even the corporate IR professionals, according to those who responded to the survey. The findings indicate that regulations alone will not solve the current crisis of confidence. While respondents indicate that certain provisions within Sarbanes-Oxley are very important to restoring confidence, buy-side investors stress the need for corporate IR professionals to communicate more frequently, more openly, and to a broader audience, in order to restore trust. Both buy-side investors and sell-side analysts indicate that they are ready and willing to receive and review information in new formats, such as video Webcasts, which will provide new opportunities for corporate IR professionals to reach out to the financial community. Lastly, corporate IR professionals are heeding the media and institutional investors' call for more information in earnings releases, as is demonstrated by the responses, and this may be evidence of a trend that is beginning to develop among corporations.
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